Continuing Criminal Probe Of Titan May Derail Lockheed Deal

Shares of Titan Corp. tumbled 20 percent after the company said it was not able to settle a criminal probe before Friday's deadline for Lockheed Martin Corp.'s $1.66 billion takeover offer expired.

The sale of Titan, a provider of translators to the U.S. military, had been delayed twice amid a probe of whether consultants for Titan bribed foreign officials. Titan also has had disputes with the Army over its current translation contract and is being challenged for a new contract to be awarded later this year.

"There's too much stuff going on around Titan," said Frank Giove, an analyst at Trusco Capital Management in Atlanta. Trusco held 675,943 Lockheed shares at the end of March and doesn't hold Titan shares. "I always thought that deal was expensive, and they're better off without it."

Lockheed, the largest U.S. defense contractor, said in April that completion of the deal, which was announced in September, was contingent on resolution of the probe.

It set a deadline of 5 p.m. Friday.

A renegotiated deal is "very unlikely," said Jim Zhao, an analyst at Federated Investors Inc., which owned more than 495,000 Lockheed shares at the end of March. "I don't see why Lockheed would want to get further dragged down."

Lockheed spokesman Jeff Adams declined to comment on the status of the deal. Titan spokesman Wil Williams said he could not go beyond the contents of the company's news release.

Titan's shares fell $3.71 to $14.53 on the New York Stock Exchange. Earlier they dropped to $13.96.

Titan's shares were trading at $16.96 before the planned sale to Lockheed for $22 a share was announced. They peaked at $21.90 on Jan. 26. Lockheed cut the price to $20 a share in April after discovering the possible bribes in February.

Lockheed chief executive Vance Coffman, 60, had wanted to buy Titan to bolster Lockheed's role as the biggest supplier of computers and services to the federal government by acquiring Titan's 8,800 technicians with security clearances.

The Justice Department is investigating whether payments made by Titan consultants in Asia, Saudi Arabia and the African nation of Benin were violations of the Foreign Corrupt Practices Act. In March, Titan said it established a $3 million reserve to cover potential fines from the probe.

Titan also is facing questions about its work providing worldwide language and translation services for the U.S. Army, including in Iraq and Afghanistan. Its five-year contract for the work, valued at $657 million, expires in September.